We can use the following simple approaches to derive a reserve distribution net
of reinsurance under non-proportional covers:
• Derive a gross distribution, and scale down the distribution such that the
mean equals the net best estimate. Under this method, we will usually
overestimate the uncertainty surrounding net reserves because
reinsurance protection will dampen down the volatility associated with
individual large claims.
Are they saying that gross distribution is scaled down to net best estimate such that the mean remains the same as gross distribution?
Estimate a distribution of reinsurance to gross reserve ratios and apply
this to the gross reserve distribution.
distribution of reinsurance reserve refers to reinsurance recoveries? But this is not the same as net right?
Kindly help!
Thanks
Last edited: May 29, 2018